The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: May June July Sales $112,000 $141,000 $187,000 Manufacturing costs 47,000 61,000 67,000 Selling and administrative expenses 32,000 38,000 41,000 Capital expenditures _ _ 45,000 The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $7,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in September, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 75% are expected to

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Cash Budget

The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

  May June July
Sales $112,000   $141,000   $187,000  
Manufacturing costs 47,000   61,000   67,000  
Selling and administrative expenses 32,000   38,000   41,000  
Capital expenditures _   _   45,000  

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $7,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in September, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 75% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of May 1 include cash of $43,000, marketable securities of $60,000, and accounts receivable of $134,000 ($98,000 from April sales and $36,000 from March sales). Sales on account for March and April were $90,000 and $98,000, respectively. Current liabilities as of May 1 include $11,000 of accounts payable incurred in April for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $17,000 will be made in June. Sonoma’s regular quarterly dividend of $7,000 is expected to be declared in June and paid in July. Management wants to maintain a minimum cash balance of $34,000.

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1.  Prepare a monthly cash budget and supporting schedules for May, June, and July. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign.

Sonoma Housewares Inc.Cash BudgetFor the Three Months Ending July 31
  May June July
Estimated cash receipts from:      
Cash sales $fill in the blank 382fc1fc3fa1045_1 $fill in the blank 382fc1fc3fa1045_2 $fill in the blank 382fc1fc3fa1045_3
Collection of accounts receivable fill in the blank 382fc1fc3fa1045_4 fill in the blank 382fc1fc3fa1045_5 fill in the blank 382fc1fc3fa1045_6
Total cash receipts $fill in the blank 382fc1fc3fa1045_7 $fill in the blank 382fc1fc3fa1045_8 $fill in the blank 382fc1fc3fa1045_9
Estimated cash payments for:      
Manufacturing costs $fill in the blank 382fc1fc3fa1045_10 $fill in the blank 382fc1fc3fa1045_11 $fill in the blank 382fc1fc3fa1045_12
Selling and administrative expenses fill in the blank 382fc1fc3fa1045_13 fill in the blank 382fc1fc3fa1045_14 fill in the blank 382fc1fc3fa1045_15
Capital expenditures     fill in the blank 382fc1fc3fa1045_16
Other purposes:      
Income tax   fill in the blank 382fc1fc3fa1045_17  
Dividends     fill in the blank 382fc1fc3fa1045_18
Total cash payments $fill in the blank 382fc1fc3fa1045_19 $fill in the blank 382fc1fc3fa1045_20 $fill in the blank 382fc1fc3fa1045_21
Cash increase or (decrease) $fill in the blank 382fc1fc3fa1045_22 $fill in the blank 382fc1fc3fa1045_23 $fill in the blank 382fc1fc3fa1045_24
Cash balance at beginning of month fill in the blank 382fc1fc3fa1045_25 fill in the blank 382fc1fc3fa1045_26 fill in the blank 382fc1fc3fa1045_27
Cash balance at end of month $fill in the blank 382fc1fc3fa1045_28 $fill in the blank 382fc1fc3fa1045_29 $fill in the blank 382fc1fc3fa1045_30
Minimum cash balance fill in the blank 382fc1fc3fa1045_31 fill in the blank 382fc1fc3fa1045_32 fill in the blank 382fc1fc3fa1045_33
Excess (deficiency) $fill in the blank 382fc1fc3fa1045_34 $fill in the blank 382fc1fc3fa1045_35

$fill in the blank 382fc1fc3fa1045_36

 

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